No, this is an article specifically about the way real estate is treated by tax regulations which allow well advised investors to put money in the bank by offsetting gains with losses (some of which only exist on paper). And I want to share with you some real estate investment secrets that don’t require you to attend Krull University.

I can’t speak to the particulars of Trump’s holdings, but when I’m helping clients and their CPAs and attorneys with estate planning, there is no bigger advocate for the importance (and intelligence) of an investment portfolio containing income producing properties — especially when they (perfectly legally) show no taxable income.

And though I never attended Trump University, I can tell you that owning investment real estate benefits investors in ways other investments simply can’t. Mainly:

Over time, rents generally increase and as rents increase, so will cash flow.

Over time, real estate generally appreciates in value, which means it can be re-financed, allowing you to pull cash out (called a “cash out re-fi”).

Bonus: the cash that’s pulled out in a re-fi is not taxable because no asset has been sold or transferred (and this cash can be spent on anything from a car, to college tuition, to another income property, or even a life-size tax deductible portrait of Donald Trump).

If you have a loan on the property, the mortgage interest is tax deductible, so you get to apply that as an expense against earnings.

Even cooler, the tax code allows you to depreciate (some say “negatively amortize”) the value of the structure(s) on the property over a period of years. This means each year you get to “pretend” you’ve spent this decreased value as an actual expense, and apply it against earnings.

And even cooler than that, if you sell the property at a profit, you can apply those gains to the purchase of a new property and defer capital gains until the replacement property is sold (and not re-invested in anything else). This is called a tax deferred exchange.

You can keep selling and exchanging property, which is why people describe this investment philosophy as “exchange, exchange, exchange, die.”

Depending on how the properties are held, your heirs may be able to receive your property(ies) without having to pay the taxes.

Keeping all of this in mind, it’s possible to invest in a property, put money in the bank, AND legally report a loss on your taxes (to the point where you may owe no taxes, or even accrue a tax loss that you can apply against profits in future years).

For example, here’s how this would look for an investment property that a client of mine recently looked at:

Purchase Price: $1,800,000

Yearly rents of $122,400.00

And yearly expenses (not including mortgage payments) of $38,000 (or 31% of earnings)

If you paid all cash, the property would kick off $84,350 a year.

This is all well and good, but now apply an depreciation deduction of -$45,818 and instead of paying taxes on the full $84K, you’re now only paying taxes on $38,532. (Congratulations, you’ve just sheltered close to $46,000!)

Now, let’s say you have an interest only loan of $1,260,000 on the property at today’s prevailing rate of 3.95% interest. Apply the mortgage interest deduction of $49,770 and now you’re showing a total reported loss of approximately -$11,200.

Because I have a calculator set up for this stuff, I’ll do the math for you:

In the above example, after paying your expenses and your mortgage, you put $34,584 in the bank.

But since you’re showing a loss, you’re not paying any taxes on it.

Oh, and as a matter of fact, since you’re showing a loss in excess of your income, you may get to apply this loss to profits from other real estate holdings, or hold on to it and apply it to future earnings (called a “carry forward” loss).

I’m not an accountant, so don’t run off and invest based on the above information, but the point I’m trying to make is that even if you are not Donald Trump, holding real estate correctly can allow you to avoid or defer taxes.

When it comes to death, on the other hand… If I come up with anything to stave that off, I’ll make sure to let you know.